With the New Year’s bell about to ring and election season fading away, it is possible to make better educated guesses about what 2021 might bring from a global trade perspective.
The indications are that the U.S. will play a more influential role on the global stage while continuing to strongly support American businesses. New free trade agreements are therefore on the cards, along with new customs and compliance requirements for shipments in the booming ecommerce sector.
New Free Trade Agreements
On the U.S. side of things, the change in administration will have impact on the America’ position towards global trade. Keeping in mind earlier campaign remarks and the recent announcement of the Biden administration to appoint Andrew Blinken as Secretary of State, it is a fair assumption that the U.S. will be looking for expansion and re-establishment of trade relationships in the coming years. That will include a fresh effort on concluding additional Free Trade Agreements (FTAs), a likely revisit of negotiations on the Trans Pacific Pact (USA–ASEAN) can be expected as well as the review of a few other FTAs that were slowed down, and further down the line even a Trans-Atlantic (U.S.-EU) pact, possibly spearheaded by a UK-USA agreement first.
Globally, two components will draw a lot of attention. First of all, after a first quarter adjustment to the new way of customs clearance, the UK will hopefully settle into its new Brexit legislation and take a closer look at trade facilitation and hastily copied and implemented Free Trade Agreements. That will open the door for simplified import procedures (i.e. more administratively controlled processes to avoid border delays) and renegotiating and adjusting duty rates and Rules of Origin is to play a big part in coming year(s) – the copied FTAs include cumulation from EU countries (which means parts sourced in the EU can count towards qualifying materials) and that is an awkward rule at best.
Less Global Trade Friction
Regarding the additional duty rates the Trump administration put in place on imports (either on specific goods and/or from specific countries), it is to be expected those will be reduced if not nullified over the next months or years.
That does not mean things will go back to how they were prior to 2016. The U.S. is expected to continue operating more forcefully when it comes to supporting American businesses and industries against unfair third country competition, and that includes protectionary measures. Perhaps there will be an uptake in the more traditional Anti-Dumping/Countervailing Duty cases through the WTO as a preferred path over unilateral actions.
Ecommerce Boom: Customs and Compliance Implications
Lastly, there is the ecommerce surge and international trade facilitation of it. Ecommerce, headed up by retail growth at a high rate of around 20%-23% until recently, exploded in 2020 (for example Forbes Magazine noted the May 2020 year over year growth was 77%) and will stay a part of every company’s selling strategy. Forced or accelerated by the pandemic, companies have adjusted their customer interactions, and ecommerce strategies will remain an integral part of all global businesses. No longer confined to specific market segments, this change drastically affects how global trade is conducted and where resources will be spent. Shipping directly to customers affects many aspects of the global supply chain and companies now must account for shipping and compliance aspects different from previous models.
Various governments (like the EU and Australia) already implemented or announced changes regarding treatment of low value shipments (value added taxes are no longer waived) and with more revenues at stake more governments will follow that trend.
More scrutiny on the compliance front is another logical step. The ecommerce burst included markets outside the traditional ecommerce-heavy retail products. Industries with a heavier compliance burden (for example dual use goods) have also shifted to online models and is dealing with non-traditional importers that will be less familiar with the compliance measures they need to comply with. New legislation/procedures will certainly make their entry in 2021 to ensure products do not end up in the wrong hands.
Other than all that, let’s hope Feyenoord soccer club wins a Cup in 2021. Or Buffalo Bills the Super Bowl in football. That will definitely mitigate a lot of the stress that comes with a lot of changes.
How Descartes CustomsInfo Can Help
With change comes the need to be proactively prepared for compliance reasons and to be able to leverage benefits. The best way to move ahead and keep supply chains moving is via software solutions such as that provided by Descartes CustomsInfo – from HTS code research and classification, including bulk classification and landed cost calculations, to content for global trade management and enterprise resource planning systems as well as ecommerce platforms.